If the March Insanity workplace betting pool doesn’t fairly scratch your itch for motion, Robinhood’s (HOOD) bought you lined.
This week, the dealer launched a prediction markets buying and selling platform within the Robinhood app, enabling prospects to “have interaction with occasions that align with their pursuits” by buying and selling contracts on the result of particular real-world occasions.
Not into sportsball? You can too wager on Could’s goal fed funds charge in Robinhood’s new prediction market hub. Leisure, politics, the financial system and different hotly debated water-cooler matters are certain to observe.
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What’s occasions buying and selling?
The grownup time period for occasions buying and selling is derivatives buying and selling, which entails shopping for a contract whose worth is derived from the worth of an underlying asset and even one other by-product. (This derivatives explainer expertly unpacks the earlier sentence.)
Basically, derivatives are a facet guess between market members on what’s going to occur. Occasion contracts specifically are structured round “sure” or “no” outcomes, with the value of the contract primarily based on the chance of the occasion’s end result.
In case you’re proper, the contract pays out $1 (minus commissions and charges). In any other case, the contract expires nugatory.
There are a number of sorts of derivatives, together with choices, futures, forwards and swaps — as in credit score default swaps, which had been on the middle of the worldwide monetary disaster in 2008-2009.
Robinhood prediction contracts will initially be accessible within the U.S. by means of KalshiEX, an event-based trade that operates beneath Commodity Futures Buying and selling Fee (CFTC) laws. Aspect be aware: KalshiEX efficiently sued the CFTC in 2024 for rejecting its proposal to make use of by-product contracts to guess on congressional management.
Robinhood’s taking its second shot
This isn’t Robinhood’s first foray into the predictions market. In 2024, the dealer allowed prospects to commerce on the result of the presidential election. Earlier this 12 months, on the request of the CFTC, Robinhood known as off a wider launch of occasion buying and selling organized across the Tremendous Bowl.
KalshiEX’s profitable go well with towards the CFTC — in addition to a looser regulatory setting — performs in Robinhood’s favor this go-round. So does the dealer’s rep for undercutting rivals’ charges.
Robinhood prospects pay a 1 cent per contract buying and selling fee once they purchase or promote an occasion contract, in addition to a per-contract trade charge (usually 1 cent) and, if relevant, a ramification (additionally usually 1 cent), in response to Robinhood. For comparability, Interactive Brokers, which launched occasion buying and selling in 2022, fees a flat charge of 10 cents per contract.
Entry to occasions buying and selling requires being authorised for a Robinhood Derivatives account and is just accessible to U.S. residents with a person Robinhood investing account with both choices buying and selling approval (degree 2 or 3) or one which’s margin investing enabled.
Backside line
Betting on the result of a basketball recreation, election or film’s Rotten Tomatoes ranking isn’t investing, even in the event you’re doing it on a authentic investing platform. And whereas it’s definitely true that there are similarities between choices buying and selling and sports activities betting, sensible gamblers solely play with cash they’ll spare to lose.
Editorial Disclaimer: All traders are suggested to conduct their very own impartial analysis into funding methods earlier than investing resolution. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
